I was talking with an experienced Angel Investor recently who tends to mostly invest in tech startups. He had invested in a Silicon Valley startup (B), 2 years ago and was beaming at the fact that it was clear to him that the startup was finally on the verge of generating some ‘serious revenues’.
What interested me was his comment that he had almost invested in another startup (A), with a similar but stronger model, 6 months prior to coming across startup B. I asked him why he hadn’t and he said ‘they were making me work too hard in order to invest in them’.
The Angel elaborated. He said that like most investors he received several pitches and contacts a day from entrepreneurs with the next big thing. He still runs his own company and has a family, so his time was precious. He went onto to say that he really liked Startup A’s CEO and the people he bought to the pitch. He described them as being ‘committed’, ‘focused’ and ‘resourceful’. The sort of people he could work with.
So far so good. Great idea, great team. ‘The problem was’, the Angel continued, ‘it was more a meeting where I asked them lots of basic questions, rather than them present me with the answers to questions I would have asked’.
This is not uncommon. Sometimes, when you have lived and breathed your business and know the detail inside out, you forget what it is like for someone who is hearing about it for the first time. This is one reason why it’s so valuable for you to have a dry run of your pitch with an appropriate trusted third party.
Lawyers know that they must anticipated as many of the questions and issues a judge and jury is like to raise or be troubled by and deal with them at the outset. And salespeople are trained to ‘inoculate’ against a customer’s potential objections.
It doesn’t matter whether you go to your investor pitch knowing all the answers. If the investor doesn’t ask you the question or you get sidetracked, you have lost the opportunity to put across crucial information. It’s critical that you answer the fundamental questions investors are concerned with, in your investor presentation materials and pitch, before they ask them. When you do that, you not only convey competence and professionalism. You also demonstrate and understanding of what is important to an investor and your ability to sell.
Of course any good investor will still drill down on the detail and ask you a range of penetrating questions. That’s to be expected. But you must make sure that you have covered the first layer of detail that an investor will be interested in.
I asked the Angel whether he knew what happened to Startup A. ‘Never heard of them again’ he said. The equation is clear – the easier you make it for an Angel Investor or Venture Capitalist to fully understand all aspects of your investment proposition, the more likely they are to fund you.